Stock Name: DIALOG
Company Name: DIALOG GROUP BHD
Research House: MAYBANK
Dialog Group Bhd
(June 2, RM2.80)
Maintain buy at RM2.82 with revised target price of RM3.35 (from RM2.60): Securing the engineering, procurement, construction and commissioning (EPCC) job for the Pengerang centralised tankage facility (CTF) project denotes progress. We expect the Pengerang CTF project, on full-scale commercial operation by 2017, to be the main driver to Dialog's earnings with dividends to boot. Dialog is also highly tipped to bag the next few marginal field projects (Balai and Bentara), a positive to sentiment and price performance. We maintain our 'buy' call.
Dialog has clinched the EPCC contract from Pengerang Independent Terminals Sdn Bhd (PITSB) to construct the first phase of the independent deepwater petroleum terminal there. PITSB is a special purpose vehicle, 10% held by the State Secretary, Johor (Inc), and 90% owned by Pengerang Terminals Sdn Bhd (PTSB). Vopak Terminal Pengerang BV and Dialog are the joint owners of PTSB with a 49% and 51% stake.
The contract, valued at RM1.9 billion, will commence immediately and is expected to complete by 2014. The first phase of the project will have an initial storage capacity of 1.3 million cu m and six vessel berths. However, it can be expanded to 2.3 million'' cu m (+77%) in storage space should the need arise.
We are positive on the news, which tracks our expectation following the recent approval secured from the Department of Environment. EPCC job wins to date have surpassed the RM2 billion mark from three projects. Based on the contract value and time line, Dialog should recognise average revenue of RM543 million per year for this project. In total, we expect Dialog to make about RM95 million in net profit from the EPCC project, based on an estimated 5% net profit margin.
We are keeping our forecasts unchanged, as we have incorporated RM700 million to RM750 million revenue per year for the EPCC division. Our FY11 to FY13 earnings forecasts, which imply a 10% three-year compound annual growth rate, have ample room for upgrades, as we have not incorporated: (i) marginal fields impact, (ii) full earnings potential from Pengerang CTF, (iii) the Saudi Arabia supply base, and (iv) Phase 3 and beyond for the Tanjung Langsat CTF.
This lifts our target price to RM3.35, 19% upside. We have raised our sum-of-parts valuation by 29% as we have doubled the storage capacity estimate for Pengerang CTF to 2 million cu m. Other assumptions (Kertih, Tanjung Langsat CTF, other operations) remain unchanged. ' Maybank IB Research, June 2
This article appeared in The Edge Financial Daily, June 3, 2011.
Company Name: DIALOG GROUP BHD
Research House: MAYBANK
Dialog Group Bhd
(June 2, RM2.80)
Maintain buy at RM2.82 with revised target price of RM3.35 (from RM2.60): Securing the engineering, procurement, construction and commissioning (EPCC) job for the Pengerang centralised tankage facility (CTF) project denotes progress. We expect the Pengerang CTF project, on full-scale commercial operation by 2017, to be the main driver to Dialog's earnings with dividends to boot. Dialog is also highly tipped to bag the next few marginal field projects (Balai and Bentara), a positive to sentiment and price performance. We maintain our 'buy' call.
Dialog has clinched the EPCC contract from Pengerang Independent Terminals Sdn Bhd (PITSB) to construct the first phase of the independent deepwater petroleum terminal there. PITSB is a special purpose vehicle, 10% held by the State Secretary, Johor (Inc), and 90% owned by Pengerang Terminals Sdn Bhd (PTSB). Vopak Terminal Pengerang BV and Dialog are the joint owners of PTSB with a 49% and 51% stake.
The contract, valued at RM1.9 billion, will commence immediately and is expected to complete by 2014. The first phase of the project will have an initial storage capacity of 1.3 million cu m and six vessel berths. However, it can be expanded to 2.3 million'' cu m (+77%) in storage space should the need arise.
We are positive on the news, which tracks our expectation following the recent approval secured from the Department of Environment. EPCC job wins to date have surpassed the RM2 billion mark from three projects. Based on the contract value and time line, Dialog should recognise average revenue of RM543 million per year for this project. In total, we expect Dialog to make about RM95 million in net profit from the EPCC project, based on an estimated 5% net profit margin.
We are keeping our forecasts unchanged, as we have incorporated RM700 million to RM750 million revenue per year for the EPCC division. Our FY11 to FY13 earnings forecasts, which imply a 10% three-year compound annual growth rate, have ample room for upgrades, as we have not incorporated: (i) marginal fields impact, (ii) full earnings potential from Pengerang CTF, (iii) the Saudi Arabia supply base, and (iv) Phase 3 and beyond for the Tanjung Langsat CTF.
This lifts our target price to RM3.35, 19% upside. We have raised our sum-of-parts valuation by 29% as we have doubled the storage capacity estimate for Pengerang CTF to 2 million cu m. Other assumptions (Kertih, Tanjung Langsat CTF, other operations) remain unchanged. ' Maybank IB Research, June 2
This article appeared in The Edge Financial Daily, June 3, 2011.
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